AFTER 11 years of “continuous losses,” the financial resources of the Home Guaranty Corp. (HGC) have been depleted and the agency now risks losing the capacity to provide guarantees for housing loans, according to the Commission on Audit (COA).
The HGC’s “losing streak” prompted COA to sound the alarm after discovering during its audit conducted in 2012 that the government-owned and –controlled corporation (GOCC) has racked up a deficit of P13.296 billion.
Government auditors said that for the last 11 years, HGC’s performance was “underwhelming” because of its previous defaults on its guaranteed mortgages.
“[This] resulted in accumulated deficit of P13.296 billion as at December 31, 2012, thereby further depleting HGC’s financial resources that diminishes its capability to provide guarantee for loans supporting a viable shelter program,” the audit report noted.
Auditors said that the accumulation of losses over time reduced the retained earnings of the company “to a negative balance.”
The HGC provides risk coverage or guarantees and tax/fiscal incentives to banks and financial institutions granting housing development loans and home financing.
It performs its mandate by working closely with the Department of Finance, Housing and Urban Development Coordinating Council, the National Economic and Development Authority and with other government housing agencies such as the National Home Mortgage Finance Corporation, Home Development Mutual Fund or Pag-ibig, Social Housing Finance Corporation, Housing and Land Use Regulatory Board and the National Housing Authority.
State auditors said that the P2 billion loss, including the “comprehensive loss” of P575 million incurred in 2012, has seriously affected the financial condition of HGC.
The audit agency said that the GOCC started its losing streak in 2002. It said that except for years 2007 and 2009, the HGC posted net income before charges were deducted.
However, after making the deduction, the “yearly losses from 2002 to 2012” were discovered.
These financial charges refer to interest worth P9.21 billion and other charges worth P640 million, attributed from sourcing the funds through bond flotation of P7 billion, P3 billion and P12 billion Zero Coupon Bonds.
Included also in the financial charges was the interest on the issuance of debenture bonds in payment of HGC’s defaulted guaranteed accounts amounting P1.14 billion from 2006 to 2012.
“The authorized capitalization of HGC is P50 billion, however, the paid-in capital received by the corporation from the releases of the national government stood at P14 billion only as of 2012 yearend,” COA said.
The commission recommended that HGC strengthen its linkages with the national government, through the Department of Budget and Management, for the release of much needed capital. However, HGC officials claimed that in 2011 and 2012, there were notable increases in the outstanding guaranty, renewals and guaranty premium.
The gross revenue also increased by 10.41 percent from 2011 to 2012 and the net income from operations rose by 14.39 percent for the same period, they said.
“The foregoing showed that confidence of clients in HGC’s as a guarantor has been restored,” the company said.
In its official website, the HGC said that it had P9 billion worth of housing securities in its portfolio as of 2007, and has issued a total of P 72.82 billion worth of guarantees to client / partner banks.